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BUSINESS ACQUISITIONS | 12 Months Ended
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Dec. 26, 2021
Business Combinations [Abstract] |
BUSINESS ACQUISITIONS | BUSINESS ACQUISITIONS Pilgrim’s Food Masters On September 24, 2021, the Company acquired 100.0% of the equity of the specialty meats and ready meals businesses of Kerry Group plc, collectively known as Pilgrim’s Food Masters (“PFM”), for cash of £695.3 million, or $954.1 million, subject to customary working capital adjustments. The acquisition was funded with the Company’s recent senior notes offering and borrowings under the credit facility. The acquisition solidifies Pilgrim’s as a leading European food company. The specialty meats business is a leading manufacturer of branded and private label meats, meat snacks and food-to-go products in the U.K. and the Republic of Ireland. The ready meals business is a leading ethnic chilled and frozen ready meals business in the U.K. The acquired operations are included in the Company’s U.K. and Europe reportable segment. Transaction costs incurred in conjunction with the acquisition were approximately $18.4 million for the year ended December 26, 2021. These costs were expensed as incurred and are reflected within Selling, general and administrative expense in the Company’s Consolidated Statements of Income. The results of operations of the acquired business since September 24, 2021 are included in the Company’s Consolidated Statements of Income. Net sales and net income generated by the acquired business during 2021 totaled $293.6 million and $2.3 million, respectively. The assets acquired and liabilities assumed in the acquisition were measured at their estimated fair values as of September 24, 2021 as set forth below. The excess of the purchase price over the preliminary fair value of the identified net assets was recorded as goodwill in the Company’s U.K. and Europe reportable segment. The factors contributing to the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the acquisition as well as the assembled workforce. Benefits include (1) complementary product offerings, (2) an enhanced footprint in the U.K. and the Republic of Ireland and (3) an enhanced position in the fast-growing plant-based protein, direct-to-consumer and hot food-to-go markets. The goodwill is not expected to be tax deductible for tax purposes. The initial accounting for this business combination is incomplete for certain intangible assets and property, plant and equipment as additional information is necessary to conclude on assumptions used to establish the estimated fair values. The amounts recognized in these financial statements for this business combination thus have been determined only provisionally. We are currently completing fair value assessments with the assistance of third-party valuation specialists. Any adjustments identified in the measurement period, which will not exceed one year from the acquisition date, will be accounted for prospectively. The cumulative effect of these adjustments will be recorded in the period of change. The preliminary fair values recorded for the assets acquired and liabilities assumed for the acquisition are as follows (in thousands):
| Preliminary
Cash and cash equivalents | $ | 113 |
Trade accounts and other receivables | 7,387 |
Inventories | 60,341 |
Prepaid expenses and other current assets | 1,727 |
Operating lease assets | 14,648 |
Property, plant and equipment | 247,133 |
Identified intangible assets | 415,157 |
Other assets | 335 |
Total assets acquired | 746,841 |
Accounts payable | 4,615 |
Other current liabilities | 407 |
Operating lease liabilities | 18,996 |
Deferred tax liabilities | 114,701 |
Other long-term liabilities | 2,612 |
Total liabilities assumed | 141,331 |
Identified net assets | 605,510 |
Goodwill | 348,550 |
Total consideration transferred | $ | 954,060 |
The provisional valuation of identified intangible assets of $415.2 million consisted of: 1) trade names with indefinite lives of $214.0 million; 2) trade names of $36.8 million with useful lives ranging from 15 years to 20 years; and 3) customer and distributor relationships of $164.3 million with useful lives ranging from 15 years to 18 years. The following unaudited pro forma information presents the combined financial results for the Company and PFM as if the acquisition had been completed at the beginning of 2020:
| 2021 |  | 2020
| (In thousands, except per share amounts)
Net sales | $ | 15,442,724 |  |  | $ | 13,023,345 |
Net income (loss) attributable to Pilgrim's Pride Corporation | 19,519 |  |  | 104,607 |
Net income (loss) attributable to Pilgrim's Pride Corporation per common share - diluted | $ | 0.08 |  |  | $ | 0.43 |
The above unaudited pro forma financial information is presented for informational purposes only and does not purport to represent what the Company’s results of operations would have been had it completed the acquisition on the date assumed, nor is it necessarily indicative of the results that may be expected in future periods. Pro forma adjustments include depreciation on the provisional values of acquired property, plant and equipment, amortization on the provisional values of acquired intangible assets, interest expense on debt issued to finance the acquisition, acquisition-related costs incurred by Pilgrim’s and its subsidiaries and the related income tax effect of these adjustments. Pro forma adjustments exclude cost savings from any synergies resulting from the acquisition. Randall Parker Foods Limited On November 12, 2021, the Company acquired 100.0% of the equity of Randall Parker Foods Limited and its subsidiaries (together “RPF”) from several sellers for £10.0 million, or $13.4 million. The acquisition was funded with cash on hand. Transaction costs were immaterial, these costs were expensed as incurred and are reflected within Selling, general and administrative expense in the Company’s Consolidated Statements of Income. The acquired operations include lamb processing and retail packaging operations and will connect the Company’s existing lamb supply chain, bringing its farmers and customers closer together. The RPF operations are included in the Company’s U.K. and Europe reportable segment. The estimated fair values of the assets acquired and liabilities assumed are preliminary and we are currently completing our fair value assessment with the assistance of third-party valuation specialists. Any adjustments identified in the measurement period, which will not exceed one year from the acquisition date, will be accounting for prospectively. Tulip Limited On October 15, 2019, the Company acquired 100.0% of the equity of Tulip Limited and its subsidiaries (together “Tulip”) from Danish Crown AmbA for £311.3 million, or $393.3 million. The acquisition was funded with cash on hand. Tulip, which has subsequently changed its name to Pilgrim’s Pride Ltd. (“PPL”), is a leading, integrated prepared pork supplier headquartered in Warwick, U.K. The acquisition solidifies Pilgrim’s as a leading European food company, creating one of the largest integrated prepared foods businesses in the U.K. The PPL operations are included in the Company’s U.K. and Europe reportable segment. Transaction costs incurred in conjunction with the acquisition were approximately $1.4 million. These costs were expensed as incurred and are reflected within Selling, general and administrative expense in the Company’s Consolidated Statements of Income. The assets acquired and liabilities assumed in the acquisition were measured at their fair values as of October 15, 2019 as set forth below. The excess of the fair values of the net tangible assets and identifiable intangible assets over the purchase price was recorded as gain on bargain purchase in the Company’s U.K. and Europe reportable segment. The fair values recorded were determined based upon various external and internal valuations. The fair values recorded for the assets acquired and liabilities assumed for PPL are as follows (in thousands): The fair values recorded for the assets acquired and liabilities assumed for PPL are as follows (in thousands):
Cash and cash equivalents | $ | 6,854 |
Trade accounts and other receivables | 146,423 |
Inventories | 104,211 |
Prepaid expenses and other current assets | 6,579 |
Operating lease assets | 5,613 |
Property, plant and equipment | 329,711 |
Identified intangible assets | 40,418 |
Other assets | 14,647 |
Total assets acquired | 654,456 |
Accounts payable | 110,296 |
Other current liabilities | 55,830 |
Operating lease liabilities | 5,613 |
Deferred tax liabilities | 16,804 |
Pension obligations | 18,435 |
Other long-term liabilities | 1,056 |
Total liabilities assumed | 208,034 |
Total identifiable net assets | 446,422 |
Gain on bargain purchase | (53,134) |
Total consideration transferred | $ | 393,288 |
The Company performed a valuation of the assets and liabilities of PPL as of October 15, 2019. Significant assumptions used in the valuation and the bases for their determination are summarized as follows: Property, plant and equipment, net. Property, plant and equipment at fair value gave consideration to the highest and best use of the assets. The valuation of PPL’s real property improvements and the majority of its personal property was based on the cost approach. The valuation of PPL’s land, as if vacant, and certain personal property assets was based on the market or sales comparison approach. Customer relationships. The Company valued PPL customer relationships using the income approach, specifically the multi-period excess earnings model. Under this model, the fair value of the customer relationships asset was determined by estimating the net cash inflows from the relationships discounted to present value. In estimating the fair value of the customer relationships, net sales related to existing PPL customers were estimated to grow at a rate of 2.0% annually, but the Company also anticipates losing existing PPL customers at an attrition rate of 10.0%. Income taxes were estimated at 18.0% of pre-tax income in 2020 and 17.0% of pre-tax income thereafter and net cash flows attributable to PPL’s existing customers were discounted using a rate of 22.0%. The resulting customer relationships intangible asset has a fair value of $40.4 million and a useful life of 11 years. See “Note 9. Goodwill and Intangible Assets” for additional information regarding the goodwill and intangible assets recognized by the Company in the acquisition. FAMPAT/Plan Pro On April 1, 2020, Avícola Pilgrim’s Pride de Mexico S.A. de C.V. acquired 100% of the equity of FAMPAT S.A. de C.V. and Plan Pro Restaurantes S.A. de C.V. (together, “FAMPAT/Plan Pro”) for an aggregate purchase price of 70.4 million Mexican pesos, or $3.0 million. The acquisition was funded with cash on hand. Transaction costs were immaterial; these costs were expensed as incurred and are reflected within Selling, general and administrative expense in the Company’s Consolidated Statements of Income. The acquired operations produce value-added products such as taquitos, enchiladas and pizza, bringing additional breadth and diversity to the Company’s product portfolio. T he results of operations and financial position of FAMPAT/Plan Pro have been included in the consolidated results of operations and financial position of the Company from the date of acquisition. The FAMPAT/Plan Pro operations are included in the Company’s Mexico reportable segment. The allocation of the purchase price reflects fair value using Level 3 unobservable inputs and resulted in a fair value of goodwill of $2.2 million at the acquisition date, which is not deductible for income tax purposes. The values recorded were determined based on a valuation using management’s estimates and assumptions.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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